"In the near term, the main risk is that – if left unchecked – market concerns about sovereign liquidity and solvency in Greece could turn into a full-blown and contagious sovereign debt crisis," said the Fund in itsWorld Economic Outlook.

Bundesbank chief Axel Weber echoed the concerns, saying the financial system was still very fragile and subject to a "significant risk of contagion effects. A possible default by Greece would most likely be a severe economic blow for other countries in monetary union".

Debt markets are already under severe stress. Spreads on 10-year Greek bonds jumped on Wednesday to a post-EMU high of 529 basis points above German Bunds, pushing borrowing costs to over 8.3pc. The Greek daily Kathimerini said the government was out of its depth and appeared to be in a state of "nervous exhaustion".

The new twist on Wednesday was a sharp rise in default insurance on Club Med and Irish debt. Five-year credit default swaps (CDS) for Portugal rose 36 basis points to 235. Spain’s CDS rose to 17 to 162. Both countries are now nearing the all-time highs at the peak of last year’s credit crisis.

Greece’s bond market is effectively frozen, so spreads are almost meaningless. "It is a very thin market. Investors are keeping their powder dry," said Chris Pryce from Fitch Ratings.

Marco Annunziata, Europe economist at Unicredit, said Greece must bite the bullet and activate the joint EU-IMF rescue plan, warning that time is running out with an €8bn refinancing crunch looming on May 19. "Action needs to be taken quickly. Investors want to make sure that the aid plan is no bluff," he said.

"The external image of EMU has been seriously damaged during this crisis. The fact that a eurozone country has been forced to seek IMF assistance has not only underscored how the eurozone has been impacted more harshly by the crisis than the US, but also that the ties binding the area together are perhaps looser than previously thought," he said.

Bond investors have been alarmed by reports that Greek officials have discussed debt restructuring among a range of options with the IMF, perhaps by lengthening bond maturities. Gavan Nolan, a credit expert at Markit, said that any such move would normally trigger the default clause on CDS contracts. A restructuring would entail hefty losses for bondholders, with `haircuts’ reaching 30pc or 50pc. City bankers have been studying the `Brady bond’ formula for Latin American debt in the 1980s.

There were further concerns over news stories in the Greek media that the budget deficit for 2009 will be 13.7pc of GDP rather than the already revised figure of 12.9pc.

An EU spokesman said the exact figure will be published on Thursday by Eurostat. If there is any adjustment, the deficit target for 2010 will also be raised by the same amount. The EU is demanding a cut of 4pc of GDP this year from the final 2009 figure.

Fitch’s Mr Pryce said the fresh revision – if true – is "an unwelcome piece of news" but does not in itself imply further downgrades. He is more worried by hardening rhetoric from Greek premier George Papandreou, who reacted angrily to EU demands for further spending cuts. "This is slightly disturbing. It shows that political pressures are building up at home."

Dockworkers went on strike on Wednesday, a precursor to broader stoppages by public sector workers in hospitals, schools, and ministries. "People can only take so much," said Diego Iscaro from IHS Global Insight. "If taxes continue to go up and spending continues to be cut, support for the government will plunge. That will be counterproductive."